Philip Morris told to pay $81 million in damages to the estate of Jesse Williams

A Multnomah County jury ordered Philip Morris Inc. to pay a record-setting $81million in damages to the estate of a former Portland school janitor who died oflung cancer after smoking Marlboro cigarettes for 42 years.

Jurors apparently were angered by Philip Morris documents showing that companyofficials have known for decades that cigarettes are addictive and can causecancer.

The decision, the nation's largest such verdict, is the second in six weeks thathas awarded tens of millions of dollars in damages to injured smokers. InFebruary, a San Francisco jury awarded $51 million to a former smoker who haslung cancer. Tobacco industry analysts say the Portland verdict foreshadows aflood of similar successful suits against tobacco companies.

Philip Morris stock dropped 8.4 percent, to $37.75, on news of the decision. TheAmerican Stock Exchange Tobacco Index lost $8.33, or 3.14 percent. The index oftobacco stocks opened at $265.57 and closed at $257.24.

One juror, April Dewees, a high school science teacher, said she and fellowjurors were outraged by documents showing that Philip Morris apparently knewabout the addictive properties and cancer-causing potential of cigarette smokebut avoided telling its customers.

The personal responsibility defense did not impress the jury, Dewees said."They [Philip Morris] want it to be everyone's responsibility but theirs," shesaid. "That would work out if they told people, 'Yes, this is addictive, and youmay be one of those who can't quit.'

"Are people really making an informed decision when they don't have theinformation?" she asked.

The verdict was helped by several smokers on the jury who "confirmed that theyfind it addictive," Dewees said, adding that some jurors apparently were tryingto quit during the trial. The jury of 12 included three smokers and four formersmokers.

Overall, she said, smokers on the jury were the most inclined to find fault withPhilip Morris.

Smoker's final wish

Mayola Williams, the widow of Jesse Williams, told a phalanx of television andnewspaper reporters after the trial that the verdict advanced her husband'sdying wish.

"He wanted to make the cigarette companies stop lying," she said. "I had to gofor it because that's what my husband wanted."

Jesse Williams died of lung cancer in March 1997 at age 67.

Mayola Williams acknowledged that her late husband had himself to blame fortaking up smoking. Williams began smoking in his 20s while in the U.S. Army inKorea.

"He did have some share in the responsibility for starting," she said. But, shesaid, that doesn't excuse what Philip Morris executives did to encourage hisaddiction.

She said she hopes the verdict tells other smokers "they are being used -- justplain used -- for the game of money."

Asked about her expectations of ever receiving the award, she deferred to herattorneys, who emphasized the battle ahead.

"We know that Philip Morris is not through fighting with us about that. It's along road ahead. We understand that," attorney Bill Gaylord said.

"The fight is just beginning. We won the first round," said attorney Ray Thomas."If you think we're here as some kind of victors who have won the fight, you'renaive."

Thomas said appeals could drag on for years.

The Williams' attorneys declined to say how much of the award they stood togain. The importance of the verdict, Thomas said, was the message it sends toWall Street about the future viability of tobacco holdings.

"The whole world was watching to see if Philip Morris was going to get away withit," he said. "That's what it's all about."

If the award stands, 60 percent of the punitive damages would go to a statecrime victims' compensation fund, as directed by Oregon law.

Jurors view documents

Key to the success of the Williams' case were dozens of previously confidentialPhilip Morris documents, made public in 1998.

During the four weeks of testimony, jurors read numerous advertisingpublications and confidential Philip Morris documents indicating that corporateofficials knew cigarettes were addictive and caused cancer. They included:

* A 1954 advertisement called the "Frank Statement" published in 448 newspapers,including The Oregonian. The ad said there was "no proof" that cigarettes causedcancer.

* A public statement from Parker McComas, chief executive officer of PhilipMorris, that "if the industry leaders really believed that cigarettes causedcancer, they would stop making them."

* A 1969 document from William Dunn, a Philip Morris behavioral psychologist,who wrote that the primary motivation for smoking is to obtain the"pharmacological effects of nicotine."

* A 1972 document from Dunn saying that without nicotine, there would be nosmoking.

* A 1969 document by a Philip Morris vice president saying smoking is mostrewarding when people are under stress.

* A memo from a Philip Morris vice president who wrote that the company "mustprovide smokers with a psychological crutch" to continue smoking after the 1964Surgeon General's Report linked smoking with lung cancer.

Investors watch

The trial, which began with jury selection on Feb. 22, has drawn internationalattention from nervous tobacco investors.

Nick Bunker, director of tobacco and insurance stocks at HSBC Securities, one ofthe three largest brokerage firms in London, said the verdict undoubtedly wouldencourage similar suits against all cigarette manufacturers in the UnitedStates.

"The relevance in London is that Philip Morris shares are widely held byinvestors over here. And, more important, British American Tobacco is one of thelargest companies listed on the London Stock Exchange," he said. BritishAmerican Tobacco owns Brown & Williamson, the United States' third-largestcigarette manufacturer. Philip Morris is the nation's largest tobacco company.

Gary Black, a tobacco industry analyst with the New York brokerage firm ofSanford C. Bernstein & Co., said the Portland decision shows that "the tide isturning."

The analyst said the Williams case is the fifth jury verdict against a tobaccocompany in an individual injury suit since the mid-1960s. Three others wereoverturned on appeal. The fourth, the San Francisco case, has been appealed, asthe Portland case will be. Tuesday's verdict is particularly significant becauseOregon product liability laws are far tougher than those in California.

"The industry has got to recognize that . . . juries will increasingly favor theindividual plaintiffs," he said.

Black said the industry has two choices: Reach a mass settlement for allindividual claims or build the cost of continuing litigation into the price ofcigarettes.

Black said Philip Morris can well afford the cost of adverse verdicts. Thecompany sold 11.38 billion packs during 1998. At that volume, he said, the costof the Williams decision comes to a penny a pack.

"If you had $10 billion in judgments in a year, the industry could raise pricesby 50 cents a pack to cover that," he said.

Black said tobacco companies can look forward to years of suits.

"We've got a lot of incriminating documents, whistle-blowers you didn't havebefore and a lot of publicity associated with the [attorneys general] tobaccosettlement," he said.

Equally negligent

After slightly more than two days of deliberations, the jury rendered verdictson two questions:

* Was Philip Morris negligent in making dangerous cigarettes?

* Did the company lie about the link between smoking and cancer?

The jury found that both Williams and Philip Morris were equally negligent inWilliams' death and awarded no punitive damages on the negligence claim. In thenegligence claim, jurors awarded the family $21,485 in economic damages, such asmedical expenses, and $800,000 in noneconomic damages for pain and suffering.

But in the claim that Philip Morris lied about the link between smoking anddisease, jurors awarded $79.5 million in punitive damages, as well as $21,485 ineconomic and $800,000 in noneconomic damages.

Under Oregon law, nine of the 12 jurors had to agree to render a valid verdictin the case. The huge punitive damages claim squeaked through with a bareminimum of nine jurors agreeing to the verdict. The family originally had askedfor $100 million in punitive damages.

The verdict stunned the tobacco company lawyers.

Walter Cofer, lead attorney for Philip Morris, said the company would appeal theverdicts.

"It [the outcome] was unexpected," he said. "Frankly, we think the case wentwell, and we expected a victory and clearly are disappointed."

Cofer said one likely basis of an appeal would be his belief that the verdictgoes against state law. Under Oregon's product liability law, the family canrecover damages arising from injuries caused by cigarettes sold to him on orafter Sept. 1, 1988. But a ruling by Judge Anna J. Brown allowed the jury toconsider the fact that Williams smoked Marlboros for 42 years.

"Our view is that the plaintiff cannot rely on pre-1988 smoking at all," Cofersaid. "They relied on pre-1988 smoking as causing part of the injury."

-- Patrick O'Neill

CORRECTION: PUBLISHED CORRECTION RAN 4/2/99, FOLLOWS:

* An article Wednesday contained an erroneous figure for the amount of damagesawarded in a lawsuit by the family of Jesse Williams against Philip Morris Inc.in Multnomah County Circuit Court. The correct figure is $80.3 million.